May 23 (Bloomberg) -- The European Union should implement
austerity as a means of firing economic expansion and not view
the two ideas as mutually exclusive, said the president of
Estonia, which grew at the bloc’s quickest pace last year after
slashing spending.

“You can achieve growth through austerity. Estonia has
done that,” President Toomas Ilves said today in an interview
in the capital, Tallinn. “Growth policy -- that doesn’t make
sense to me.”

The European Union should enforce debt and spending limits
and embrace the free movement of services, according to Ilves.
Greece should meet its bailout terms to unlock further funds or
risk support for its euro-area membership ebbing in countries
such as Estonia, where wages and pensions are lower, he said.

EU leaders are meeting in Brussels today to discuss how to
stem a debt crisis that’s threatening the euro’s survival.
French President Francois Hollande has pledged to blunt the
German-led austerity drive in Europe, seeking to discuss joint
euro-area bonds to help stimulate economic growth.

Estonia, along with Baltic neighbors Latvia and Lithuania,
cut spending and raised taxes to trim budget deficits by more
than 10 percent of gross domestic product in 2009-2010, even as
foreign financing dried up and export demand plunged, triggering
the deepest recessions in the world.

Growth Agenda

Buoyed by Nordic demand for its goods and improved
competitiveness after wage cuts, Estonia, which last January
became the latest country to adopt the euro, expanded 7.6
percent in 2011, outpacing the other 26 EU members.

“If you look at the list of things on the so-called growth
agenda, the last line is the internal market,” Ilves said.
“That should be the first line. The other solutions, primary
solutions, basically mean more of what we’re already doing
wrong, which is borrowing money to pay for things.”

Furthermore, European institutions are failing, with all 17
euro-area members except Luxembourg, Finland and Estonia
violating fiscal and borrowing limits, he said.

“We’re fixating on the issue of do we bail out Greece,
what do we do for Greece, do we have contagion,” he said.
“More broadly, the issue is what’s the point of the euro zone
or the EU if some countries have to follow the rules and some
countries don’t?”

Solidarity with Greece among voters in Estonia, the poorest
euro-area member, won’t last in the longer term unless the EU’s
most-indebted nation adheres to its bailout terms, Ilves said.
Estonia’s average salary is 10 percent lower than Greece’s
minimum wage, while Greeks can retire 10 years before Estonians
on pensions that are four times larger, he said.

“If in the name of solidarity you exploit responsibility
and you get to the point where you’re asking people poorer than
you to bail you out for following policies that poorer people
never even thought of following, then that’s not sustainable,”
he said.